7 open questions in the IP world

1. How will the war between Apple and Samsung end?

“I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong.” Those words, spoken by the late Steve Jobs to his official biographer, have become legend in the ongoing saga of Apple Inc.’s claims that Google Inc.’s Android operating system is a “stolen product” and that Samsung Electronics Co. Ltd.’s phones and tablets—in packaging, hardware design and user interface—are “slavish” copies of Apple’s products, as the company claimed in April 2011 in the first of several lawsuits it filed against Samsung. Samsung, for its part, has countersued Apple in jurisdictions around the world and at the International Trade Commission.

The twists, turns, verdicts, determinations, sanctions, injunctions and appeals in the various litigations have grabbed more headlines than any IP dispute in history. How the story ends is far from clear, but experts have begun to speculate on its ultimate impact on the smartphone wars.

Gene Quinn, founder of the blog IPWatchdog, predicts Apple and Samsung will soon settle and may even usher in a new era of cooperation and cross-licensing in the mobile device world. Perhaps the recent settlement and 10-year licensing agreement between Apple and HTC, which Apple had accused of infringing 20 of its iOS-related patents, indicates that Apple CEO Tim Cook may be ready to wrap up the Samsung fight. Quinn says he would be shocked if it continues for much longer. “There’s too much money to be made by companies playing nicely,” Quinn says. “The battle in these big patent wars is to be the only monopoly standing, which has never happened. And you can make an awful lot of money in an oligopoly.”

Chris Carani, a shareholder at McAndrews, Held & Malloy, isn’t so sure about that—the issues at stake are big enough that the U.S. litigation (the one that saw a jury award Apple more than $1 billion) is likely headed to the Supreme Court, he says. But when it comes to the ultimate impact of the battle, he says, it’s clear in this case that “design reigns supreme.”

Apple broke ground by launching a design patent offensive to protect the aesthetics of its products and then aggressively enforcing its patents. “This case is really forcing people to take a hard look at design rights—and these aren’t just companies that deal with [décor or handicrafts],” Carani says. “These are large, high-tech companies. You’re already seeing it play out in companies that typically would have a patent department and a trademark department: Now they’re launching design departments and … employing sophisticated and aggressive design patent protection programs.”

The focus on design makes cross-licensing tricky, Carani adds. The aesthetics of a company’s products are its persona.

2. How will companies—and the patent office—deal with the implementation of the America Invents Act?

The Leahy-Smith America Invents Act (AIA) introduced sweeping reforms to the U.S. patent system when it became law in September 2011, and its key provisions have effective dates of September 2012 and March 2013. Already, people are beginning to grapple with understanding and interpreting the patent system it creates, which Wil Rao, a shareholder at McAndrews, Held & Malloy, says is a parallel track to the pre-AIA patent system.

“Maybe 20 or so years from now, when the last vestiges of the pre-AIA system fade away, we’ll find that the U.S. patent system overall is better,” Rao says. “Until then, the new parallel-track patent system is poised to create a higher degree of uncertainty and complexity and, potentially, a new drag on innovation and efficient market operation.”

Some of the key changes the AIA introduced are:

Phasing out the first-to-invent system: The AIA will move the U.S. toward a first-inventor-to-file system in March, phasing out the current first-to-invent system that stands apart from other countries’ approach. Now the patent office will grant patents to the first person to file his patent application. The legislation also expands the definition of prior art. For instance, it now includes international prior public use or sale. “To what extent do you comb the world for prior public use or sale, in addition to printed publication, in assessing whether your patent is valid or in trying to invalidate a patent asserted against you?” says Jeanne Gills, a partner at Foley & Lardner. “It’s moving us to take a more global view of prior art and, arguably, of the filing date: Now, an application filed anywhere in the world is your effective filing date.”

An anti-joinder provision: The AIA raises the bar for bringing multidefendant patent suits, a favored practice of nonpracticing entities (NPEs) wishing to cast a wide net in asserting their patents. The rule has spawned some complications, however. “Transfer and pre-suit consolidation has become a more complex area because NPEs still want to bring actions against many companies [in one suit] but have to face the fact that they have to sue them separately,” says Pavan Agarwal, a partner at Foley & Lardner.

New Patent Trial and Appeal Board hearings: The AIA gives parties a new way to contest patents within nine months of their grant with its new post-grant review proceedings. After nine months, they can file for the similar inter partes review. Both have shorter time frames than litigation, and they provide a new strategic card for parties to play. It’s yet to be seen what effect the availability of the new proceedings has on litigation. “The U.S. is trying to parallel the system of opposition proceedings in Europe, and it’s really efficient,” says Kelly Burris, a shareholder at Brinks Hofer Gilson & Lione. “If you’re contesting the patent, you can do so very quickly.”

3. Are human genes patentable?

In November 2012, the Supreme Court granted cert in Association for Molecular Pathology v. Myriad Genetics, Inc., a lawsuit challenging Myriad’s patents on BRCA1 and BRCA2, two human genes. The U.S. Patent and Trademark Office (PTO) granted Myriad patents for the genes as a composition of matter—one of the four categories of patentable matter. Myriad figured out how to isolate and purify the genes to effectively test them for mutations associated with an increased risk of breast and ovarian cancers and to inform treatment options.

The plaintiffs in the Myriad case fear the patents are delaying further research and testing of BRCA1 and BRCA2 and thus are limiting treatment options for patients. Biotechnology companies such as Myriad counter that if they can’t patent and profit from their discoveries, innovation will suffer.

The Federal Circuit has twice upheld Myriad’s patents, once in light of the Supreme Court’s March 2012 opinion in Mayo Collaborative Services v. Prometheus Laboratories, Inc. In that case, the Supreme Court held a Prometheus-invented method for determining the effectiveness of a drug in patients was unpatentable because it involved a law of nature and “simply tells doctors to engage in well-understood, routine, conventional activity previously engaged in by scientists in the field. Such activity is normally not sufficient to transform an unpatentable law of nature into a patent-eligible application of such a law.”

In light of Mayo v. Prometheus, biotech companies “are working to make sure the [patent claims] focus more on the novelty and the testing processes at the exclusion of computers for processing bioinformation in patent claims,” says Edward Reines, a partner at Weil, Gotshal & Manges.

The Supreme Court took up the Myriad case on one question: Are human genes patentable? Its answer, expected this year, could have huge implications. According to the American Civil Liberties Union, about 20 percent of human genes are patented.

But as it did in Mayo v. Prometheus, the Supreme Court could deliver another fact-specific analysis without crafting a definitive standard, says Jonathan Harris, a partner at Axinn, Veltrop & Harkrider.

“In Mayo, the court generally discussed what to analyze or review in assessing patent eligibility without giving a clear bright-line test, and I think they’ll do that again,” Harris says. “But a lot of people in the industry are concerned that they’re going to limit eligibility by striking down these claims. It’s hard to know, but they took the Myriad case for a reason. There’s obviously something the Federal Circuit did that they did not like.”

4. Who will fill Kappos’ shoes?

If this is the PTO’s Pax Romana, recently departed Director David Kappos is its Augustus. Kappos, former engineer and IP head at IBM Corp. who took his PTO post in August 2009, announced in November 2012 that he would step down at the end of January. Seemingly across the board, the patent bar was sad to see him go. It appears that Kappos’ experience at IBM—one of the country’s most prolific licensing programs and largest holders of patents—gave him a unique understanding of the interplay between the patent office and patent attorneys, and the Kappos directive was to work with patent applicants rather than against them.

“From a patent practitioner’s standpoint, I’ve noticed there is more of a spirit of cooperation at the patent office compared to an adversarial relationship in the past,” says Kelly Burris, shareholder at Brinks Hofer Gilson & Lione. “[Kappos] has really turned things around, and I hope his successor is able to take that baton and run with it.”

Among the agency’s achievements under Kappos was a reduction of the PTO’s infamous patent application backlog by nearly 150,000 despite a 5 percent annual increase in filings, thanks in part to new patent-examiner hires and the opening of satellite patent offices. Kappos also led the agency as it began the task of implementing the AIA.

Deputy Director Teresa Stanek Rea will serve as acting director after Kappos’ departure, and she is on every shortlist of potential Kappos successors.

5. How will companies manage the new gTLDs?

The Internet Corporation for Assigned Names and Numbers (ICANN) has spent years preparing to roll out its new generic top-level domain names (gTLDs) and working with applicants to assign them. In 2013, the roll-out begins (absent any further delays).

How does it work? Consider a company like The Walt Disney Co., which currently owns Disney.com and has to monitor for cybersquatters who try to set up shop at, say, Disney.net or Disney.sy. Now companies will have a chance to register for gTLDs—soon we may visit Disney.film or Disney.toys—and “dot-brand” TLDs like .disney.

While the new gTLDs offer new branding opportunities, they also present new risks and expenses for brand owners facing hundreds of new TLDs to monitor for cybersquatting or to buy up defensively.

“Suddenly there are all these new top-level domains, and we can’t even know how to protect ourselves until we know what consumer behavior is going to be and how [gTLDs] will be used,” says Pamela Chestek, proprietor of the blog Property, Intangible and former in-house IP attorney at Red Hat Inc. “It’s a brave new world out there for brand owners.”

Built into the gTLD system is a Trademark Clearinghouse meant to help brand owners protect their trademark rights in the face of the new TLDs, and ICANN continues to meet with stakeholders, take comments and refine the system. The clearinghouse raises its own set of questions, notes Erik Pelton, a former PTO examiner who now manages the boutique firm Erik M. Pelton & Associates.

“We’re getting closer to ICANN launching a system where brand owners can make objections or file [to protect their trademarks] … and we’re still waiting to see how that plays out,” Pelton says. “What will this clearinghouse look like? What will the timeline be for brand owners to participate in it? How expensive will it be? How beneficial will it turn out to be?”

Some companies have been active participants in the gTLD process—Canon Inc. acquired .canon; Google applied for domains including .youtube and .lol.

“The vast majority of companies are keeping an ear to the ground and paying attention to what’s out there,” says Joshua Jarvis, a lawyer at Foley Hoag. “Many are looking at the list of TLDs ICANN has published to consider both opportunities and risks—where’s the harm going to come from?”

6. How will IP issues play out on mobile platforms?

Brand owners largely have gotten the hang of policing websites for trademark infringement, but mobile platforms and the rise of apps have introduced a host of new issues. While much of the regulatory and legal focus surrounding mobile devices has been privacy-related, IP issues are beginning to percolate, and brand owners, platform operators and app developers are beginning to grapple with some of the associated complications. On the web, for instance, brand owners simply report static webpages for takedown; in the mobile world, they may be confronting infringement by apps that millions of users have already downloaded. The money users sink into in-app purchases can further complicate matters.

Third parties have developed technologies to help brand owners police various mobile platforms, but as the weight of the user base shifts to mobile, IP issues will come to the forefront, says Randi Singer, a partner at Weil, Gotshal & Manges.

“It’s much, much harder for trademark and brand owners and copyright owners to police things in an app store—the apps themselves and things inside the app,” Singer says. “The policing has become infinitely more complicated, and it’s always a moving target whether somehow your brand has been co-opted inside an app, the app itself infringes or the title infringes.”

7. What are the copyright rules when TV and the Internet collide?

The copyright law surrounding established technologies such as cable TV, video-on-demand and VCRs/DVRs is fairly settled, but new-media twists on TV-watching have led to a host of cases examining how to apply the existing law to technologies that hadn’t yet been conceived of when the law was set.

A particularly action-packed area surrounds one question in particular: What hath Cablevision wrought?

The 2nd Circuit delivered a 2008 ruling in The Cartoon Network LP v. CSC Holdings, Inc. concerning cable provider Cablevision’s DVR service, which stores video remotely in a centralized cloud and streams it to users who wish to “record” the shows. The appeals court found that the service does not infringe on the public performance rights of The Cartoon Network and other copyright owners because “each … playback transmission is made to a single subscriber using a single unique copy produced by that subscriber,” and therefore they are effectively analogous to VCR recordings.

New services have since launched that seem aimed at the window the Cablevision case opened. The Internet startup Aereo, for example, provides cheap streaming television to users via thousands of tiny antennae that users lease. In the inevitable legal challenges to the service, the U.S. District Court for the Southern District of New York in July 2012 denied networks’ request to shut down the service, reasoning that Aereo’s services provide private video streams and thus, under the Cablevision reasoning, are not unlicensed public performances in violation of the Copyright Act. The 2nd Circuit heard oral arguments in the case on Nov. 30, 2012.

“In some ways the cases are quite simple to describe,” says Todd Larson, a lawyer at Weil, Gotshal & Manges. “Can we create this centralized VCR? Is this technology more like the Internet version of the DVR, or more like Internet-delivered video-on-demand? How you answer that simple question has very different legal implications, and very quickly, you get into the finer points of arcane copyright law definitions, including especially what it means to ‘publicly perform’ a work under the copyright law.”